TikTok’s rivals are nervous. Governments are suspicious.
A billion users are glued to their screens
The cat strains to see what is on the counter, first hopping on its hind legs, then bounding up for a closer look—only to recoil as if electrocuted at the sight of a piece of tinfoil. This six-second drama, which has been viewed more than 40m times, was highlighted by TikTok as one of its “hottest” recent videos.
Cat videos are the butt of jokes on late-night TV. But they and the hundreds of millions of other short clips uploaded to TikTok are causing sleepless nights in both Silicon Valley and Western capitals. The app is growing at a pace that has startled competitors and regulators. In just five years it has broken into the top tier of global social media, a club that American officials used to consider so closed to competition that they started an antitrust case against its leading member, Facebook. As TikTok hoovers up users, and the advertising dollars that follow them, its larger rivals are rewriting their own apps to mimic the young upstart. The shake-up may not end there: TikTok’s move into e-commerce could disrupt another industry.
Governments eye TikTok nervously for different reasons. As the first consumer-facing app from China to take off in the West, TikTok is a source of pride in Beijing. But the app’s Chinese ownership makes politicians elsewhere uneasy about its tightening grip on their citizens’ attention. Users’ data could end up in the wrong hands, they fear, or their viewing could be moulded by Chinese propagandists. TikTok has already been banned in India, formerly its largest market. Other countries, including America, are considering their next move.
It was only ten years ago that Zhang Yiming, a bookish Chinese entrepreneur a year older than Facebook’s Mark Zuckerberg, founded a software firm called ByteDance. Among its first creations were Neihan Duanzi (Inside Jokes), a platform for sharing gags, and Toutiao (Headlines), a news aggregator. The apps used artificial intelligence (ai) to learn what kind of sketches or stories users liked. Both took off; today Toutiao is China’s biggest news aggregator, with 360m users.
Mr Zhang soon wondered what else his algorithm might do. In 2016 ByteDance released Douyin (Shaking Sound), an app for recording and sharing lip-sync videos. Douyin was modelled on Musical.ly, another Chinese-made lip-syncing app that was popular with young Americans, but enhanced by ByteDance’s ai discovery engine. It was a hit. The following year ByteDance released a twin app outside China, with an identical interface and algorithm but separate content. It used Douyin’s logo of a juddering musical quaver but had a snappier name: TikTok.
At first TikTok was little noticed outside Asia. But in 2017 ByteDance bought Musical.ly and soon transferred its 100m users to TikTok. TikTok has since grown like no other app. In September, when it was a little over four years old, it reached 1bn users, a milestone that Facebook, YouTube and Instagram took eight years to pass, albeit at a time when fewer people were online. It has been the world’s most downloaded mobile app since early 2020. And whereas young audiences are lukewarm about Facebook, TikTok has them hooked. Some 44% of its American users are under 25, believes eMarketer, a data company, compared with 16% of Facebook’s.
Sources: TikTok; eMarketer
TikTok makes creating films easy. It has done for video-editing what Instagram did for photo-editing a decade ago, allowing amateurs to turn wobbly recordings into slick-looking films. Better yet, the AI discovery algorithm dangles the prospect of viral success before unknown creators, who struggle on apps like Facebook, which reward those with lots of followers. Whereas the biggest personal accounts on Facebook are of athletes, singers or other celebrities, the top TikTokers are famous for being TikTokers. Khaby Lame, a Senegalese silent comic, leads the pack with 146m followers. Star creators have been pampered—and paid—by the company to stay on the platform.
TikTok is also easy to watch. Whereas most social-media apps recommend content from the user’s network of friends, TikTok requires no network, no searching, nor even any login: its algorithm plucks videos from its vast archives and learns what the viewer likes. The format is supremely addictive. In America TikTok’s users spend an average of 46 minutes a day on the app, a fraction longer than they spend on YouTube and 16 minutes longer than on Facebook or Instagram.
TikTok is fast monetising this attention. Its revenues were about $4bn last year and should reach $12bn this year and $23bn in 2024, nearly all from advertising, forecasts eMarketer (see chart). That is more than Twitter, Snapchat, Pinterest and other apps in the second tier of social media and would put it on a par with YouTube. TikTok might become bigger still, judging by its Chinese twin, Douyin. The average user spends 100 minutes a day on Douyin, which accounts for more than 12% of total time spent online in China, according to Bernstein, a broker. ByteDance—which owns several popular Chinese apps besides Douyin—had 28% of China’s digital ad market last year, ahead of rivals such as Tencent and Baidu, and was still growing.
Douyin also demonstrates how TikTok could move beyond advertising. The app is a big force in e-commerce, its live-streaming stars flogging products in a 21st-century reimagining of the TV shopping channel. Although TikTok’s first such foray, TikTok Shop, which was launched in November in Britain and Indonesia, has flopped, it is unlikely to give up.
TikTok’s competitors are unnerved. In April Mr Zuckerberg announced that Facebook’s news feed, which for more than 16 years has shown users mainly posts from their friends, would become a “discovery engine”, using AI to serve up content from all over the internet—just like TikTok. He mentioned TikTok five times on an earnings call in February. Meta, the parent of Facebook and Instagram, has developed a TikTokesque short-video format called Reels, which it has incorporated into both of those apps.
Such clones are everywhere: consider Snapchat Spotlight, YouTube Shorts, Pinterest Watch and even Netflix’s Fast Laughs. Some of them are succeeding. Reels accounts for more than 20% of time spent on Instagram. YouTube Shorts has 1.5bn monthly users, which is probably more than TikTok itself.
But TikTok, in turn, is pinching some of its rivals’ ideas. It has raised the maximum length of its videos to ten minutes, eating into YouTube’s market. It has launched disappearing clips along the lines of Snapchat’s “stories”. It is trialling a subscription model, similar to that on Twitch, Amazon’s live-video platform, in which fans pay to access a creator’s channel. And it recently started paying some creators a share of ad revenues, as YouTube has long done.
All this disruption is healthy in a market long thought uncompetitive. In 2020 America’s Federal Trade Commission launched an antitrust case against Meta. As TikTok takes users and advertisers from Meta, whose market value has fallen by more than half this year, there is less reason to worry about a lack of competition.
Instead, regulators have begun to fret about TikTok for a different reason: national security. ByteDance, TikTok’s owner, is incorporated in the Cayman Islands and has investors from all over, including America’s General Atlantic and Japan’s SoftBank. Bill Ford, General Atlantic’s boss and a member of ByteDance’s board, has characterised ByteDance as “a global internet company with Chinese heritage, as opposed to a Chinese internet company”. But the firm’s headquarters are in Beijing. Like other big Chinese companies, it is subject to the influence—official and unofficial—of the Chinese Communist Party.
In 2018 ByteDance was forced to shut down Neihan Duanzi, its joke-sharing app, which once had more than 200m users, after China’s media regulator claimed that its “off-colour” content had “triggered intense resentment among internet users”. Mr Zhang, ByteDance’s founder, made a public apology: “The product has gone astray, posting content that goes against socialist core values. It’s all on me. I accept all the punishment since it failed to direct public opinion in the right way.”
What would China’s government want with TikTok? Two things, claim hawks. First, the data of the app’s billion-plus users. There is no evidence TikTok is collecting information it shouldn’t. The University of Toronto’s Citizen Lab last year found no sign that either TikTok or Douyin harvested contacts, photos, audio, video or location data without permission. It found that Douyin had features that can be considered shifty outside China, such as “dynamic code-loading” (ie, loading extra code while running). But TikTok did not.
Like most social apps, however, TikTok hoovers up information about customers’ phones, usage patterns and locations, and uses third-party tracking services. Under Chinese law, the government can demand more or less any data from Chinese firms, including data held abroad. For that reason the Committee on Foreign Investment in the United States (CFIUS), a Treasury-led panel which vets deals for national-security risks, ordered the reversal in 2020 of a Chinese company’s purchase of Grindr, a dating app which records users’ sexuality and HIV status, among other things.
TikTok says the Chinese government has never asked for, nor been provided with, users’ data (though some senior staff privately admit they might not know if it had). The app has less blackmail potential than Grindr. Yet James Lewis of the Centre for Strategic and International Studies, an American think-tank, points out that intelligence agencies’ biographic databases routinely mine social media. China’s vast domestic surveillance programme records facial and vocal prints. Logging such data, and matching it to individuals, would be easier if the information came directly from TikTok, not scraped from the web. And if TikTok’s ambitions to broaden its business are realised, the firm will know not only what its users look and sound like, but also what they buy and where they live.
In 2020 India banned TikTok and dozens of other Chinese apps. Though the ban was provoked by a border clash, India claimed the apps were “stealing and surreptitiously transmitting” Indian users’ information. Two months later Donald Trump, America’s president at the time, issued an executive order requiring TikTok to be sold to an American company within 45 days or else face a ban, citing the “vast swathes” of information it was collecting, “potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail and conduct corporate espionage”. (ByteDance successfully challenged the order in court; Mr Trump’s successor, Joe Biden, revoked it.)
TikTok has tried to calm such fears by keeping foreign users’ data out of China. This in itself doesn’t count for much: a report by BuzzFeed last month found that China-based staff repeatedly accessed American users’ data as recently as January. “Everything is seen in China,” a member of TikTok’s Trust and Safety department was quoted as saying.
On June 17th TikTok announced that American users’ traffic would henceforth be routed through servers operated by Oracle, an American firm which has a similar contract with Zoom, another tech company that has faced suspicion over links to China. Staff in China will be able to access American users’ data only via protocols overseen by a security team based in America. The details are being hammered out with American authorities. If they approve the plan, it could be replicated elsewhere.
Share of users accessing news on TikTok
in the past week, Jan 11th-Feb 21st, %
Top- and bottom-ten countries*
But there is a second, bigger fear about security, which concerns not what TikTok learns about its users, but what they learn from it. The app presents itself as an entertainment platform, with content to “make your day”. But as it has grown, so has the breadth of its output. About a third of TikTokers treat it as a source of news, according to the Reuters Institute at Oxford University. In countries with weak mainstream media the share is higher: in Indonesia, Malaysia, the Philippines and Thailand, about half use the app for news. Young people, the most avid TikTokers, are more likely than others to get news from it. Mainstream media, meanwhile, use TikTok to promote their content (The Economist launched a TikTok channel this week).
TikTok’s growing role as a news platform has sparked fears that, in the words of Ted Cruz, an American senator, it is “a Trojan horse the Chinese Communist Party can use to influence what Americans see, hear and ultimately think”. China’s government is known to manipulate social media at home. On June 3rd, the eve of the anniversary of the Tiananmen Square massacre, Li Jiaqi, a streaming salesman known as the Lipstick King, was yanked from Weibo, a social-media site, after showing a cake resembling a tank. Government censors work in ByteDance’s office in Beijing, according to a former employee (the company disputes this). Searches for Xi Jinping, China’s president, on Douyin, TikTok’s Chinese twin, return nothing but the blandest propaganda.
The same search on TikTok produces more normal results. Yet TikTok’s moderation has sometimes displayed Chinese characteristics. Internal guidelines unearthed by the Guardian in 2019 banned references to Tiananmen, Tibet and Taiwan, alongside “highly controversial topics” from other countries, including Northern Ireland. Those rules have since been liberalised; TikTok says content moderation has been run from outside China for two years. But the recommendation algorithm, TikTok’s secret sauce, is still updated by ByteDance in China.
Nana Li of the Asian Corporate Governance Association, a watchdog, doubts that the Chinese government is steering TikTok’s coverage. “Given TikTok’s popularity outside China, I don’t think they’re going to risk it,” she says. “There would be a reputational cost for all overseas Chinese companies. And for what?”
Still, American teenagers’ favourite source of entertainment and, increasingly, news, is ultimately run from China. Most countries have rules limiting foreign ownership of old-media companies, notes Rasmus Nielsen of the Reuters Institute. Media mergers in general are subject to more scrutiny than other deals, since concentration of ownership has implications beyond pricing power, he points out. Social-media platforms, by contrast, face little regulation in most democracies. Last month Brendan Carr, a member of America’s Federal Communications Commission (FCC) appointed by Mr Trump, called on Apple and Google to boot TikTok from their app stores. But the FCC cannot compel them to do so.
And whereas it is easy for regulators to monitor the output of newspapers or television stations, it is hard to know what people see on their personalised social feeds. Sputnik and Russia Today, news channels with ties to the Kremlin, were banned in many Western countries in March over what the European Union called “systematic information manipulation and disinformation” about the war in Ukraine. It would be harder to know if TikTok users were being subjected to “disinformation campaigns that benefit the Chinese Communist Party”, as Mr Trump’s executive order put it. TikTok promises that as part of its deal with Oracle it will allow third-party vetting of its algorithm.
Will this satisfy its critics? ByteDance is eager to get its international business on a surer footing. Even as TikTok has soared in popularity, the uncertainty abroad and a crackdown on tech firms at home have arguably damaged the parent company. China’s policing of online content is becoming stricter, threatening live-streaming and the commerce and advertising attached to it. Tiger Global, an American investment-management company, has reduced its valuation of ByteDance by about a third since earlier this year, to under $300bn, according to the Wall Street Journal. Last year there was talk of an initial public offering. That now seems to be off the table. Mr Zhang, ByteDance’s founder, retired as its chief executive and chairman last year, as the government’s campaign against tech magnates intensified. (He still owns a big stake in the company and reportedly retains a majority of voting rights.)
Some in TikTok compare its predicament to the suspicion that Japanese companies faced in the West in the 1980s. But the position is more complicated than that. Last year Mr Biden signed an executive order of his own, laying down criteria by which the government would evaluate the risk posed by apps connected to foreign adversaries, including China. It is reportedly working on new regulations for foreign software, focusing on misuse of data.
CFIUS, the panel that unwound the Grindr deal, is reviewing TikTok, too, and is facing mounting pressure to report (on June 24th six Republican senators sent a chivvying letter to the Treasury). The panel could order the undoing of the five-year-old Musical.ly deal—a hideously complicated prospect—or even revert to Mr Trump’s plan of forcing ByteDance to sell TikTok’s American business. Given TikTok’s popularity, CFIUS may find it easier to accept some combination of the set-up with Oracle and the opening of the app’s algorithm to outside scrutiny.
China, however, might not agree to those terms. In 2020, as Mr Trump demanded TikTok’s American business be sold, China passed a law that classified TikTok’s recommendation algorithm as sensitive technology, which could prevent its sale to a foreign company. The law may also bar ByteDance from allowing American regulators to examine its code more closely, suspects Adam Segal of the Council on Foreign Relations, another think-tank.
China might prefer to take TikTok away than to hand it over. America, for its part, could then face a choice between doing without the world’s hottest app and ignoring the risks. “At some point”, says Mr Segal, “someone has to blink.” ■